Large sized PSU bank, Bank of India is maintaining its aggressive stance on fresh recruitments as it combats the ongoing decade which has been called the retirement-decade at all PSU banks, due to the large number of retirements that are scheduled to happen by 2020. Chairperson VR Iyer informed that in FY'14 alone, BoI would recruit around 4500 officers and clerks. Iyer's higher priority is, however, upping the profitability of the lender.
Bank of India has had a difficult Q4 like most of its peers. Quarterly net profit has fallen by over 20% on a year-on-year basis, and by nearly 6% on a sequential or quarter-on-quarter basis.
However, the performance is far from the nadir it hit in the last September quarter, when quarterly net profit was around 2.5 times lesser than the current level. The Mumbai based lender is definitely building on the turnaround it registered in the December quarter.
That quarter also saw the large-sized bank get a new Chairperson, VR Iyer. She was formerly Executive Director at Central Bank of India, and even before that assignment, has had a notable career spanning 33 years with Union Bank of India, where she last served as GM. That all these three banks are headquartered in Mumbai is sure to give an added edge to her turnaround plans for Bank of India as its Chairperson & Managing Director.
Despite Q4 being difficult, the public sector lender did achieve many milestones during the full fiscal of 2012-13. Total Business has touched Rs. 6.75 lakh crore, registering a rise of 18.5% on YoY basis. Non-Interest Income is up by 13.40% on the same basis. Operating Profit for the fiscal is up by 11.42%. Book value per share has improved from Rs. 326.52 in March 2012 to Rs. 362.37 in March 2013.
Rewarding its shareholders, including Government of India, Bank of India’s Director Board has also proposed a dividend of 100% as against last year’s 70%.
But the challenges facing the bank is not lost on Chairperson VR Iyer. Her biggest strength is the fact that she is a realistic leader. Iyer is candid enough to admit that Bank of India like most of its public sector peers faces an uphill task in both credit growth as well as in deposit mobilization.
While everyone is anticipating that credit uptake will improve, she frankly admits that from her talks with some of BoI’s largest clients, no one is talking about making fresh or massive investments, yet. At the same time, Iyer feels that mobilizing low-cost deposits would be a much bigger challenge for public sector banks including Bank of India. Obviously, understanding the challenge is half-way of solving the challenge.
Another of her strengths that Bank of India is utilizing is that she is not wary about taking a contrarian position. While everyone is harping on retail loans to be the next game-changer in public sector banking sphere, she forecasts that retail loans alone won’t be enough to replace the volumes of large corporate loans that PSBs like BoI are known for.
Chairperson VR Iyer has also proved that she can also take on difficult tasks that mean quite a bit of rework in the bank’s bureaucracy, if need be. Earlier, Bank of India had embarked on an ambitious program in which specialized branches were set up to address big-ticket corporate loans. Under this scheme, out of Bank of India’s 4290 branches, 10 were designated as corporate branches and 40 were designated as mid-corporate branches. But the move proved unpopular among clients, as many of them had to shift their accounts to these specialized branches.
Sensing that this earlier move was not yielding the intended results, VR Iyer has made sure that any branch can do any business. Earlier, the majority of the branches could do only retail and agriculture loans, and designate the rest to corporate branches. The move by Iyer has now brought in a more level playing field among all branches, and heightened the competition among them.
Bank of India has also created one of the most comprehensive recovery mechanisms for addressing defaulters. This includes appointing over 5000 Business Correspondents for communicating with and recovering from thousands of small rural defaulters, as well as more stringent methods for addressing wilful corporate defaulters. Under the leadership of Executive Directors, MS Raghavan and BP Sharma, the bank had set up Debt Recovery Branches, and is actively pursuing even written-off accounts. Like a few of its peers, BoI has indicated that it won’t leave no stone unturned in its pursuit of recovery from large wilful defaulters, including methods like name-and-shame strategies.
Bank of India is bullish on growing its international business too. BoI is now in operation across 20 countries with 51 offices outside the country. One more branch was opened in Tanzania during last fiscal, while the representative office in Johannesburg was upgraded to branch. The Bank now plans to open subsidiaries in Canada, Brazil, & Botswana, while a representative office will be set up in Myanmar.
The fiscal also saw many awards being bestowed on the bank. BoI has been awarded as ‘The Best Bank for Excellence in AADHAR Related UIDAI Programme of Government of India’, from the hands of Prime Minister Dr. Manmohan Singh. The Bank has been conferred with National Award for implementing PMEGP scheme in East Zone. Bank of India has also been ranked Second Best by Ministry of MSME, New Delhi, based on its performance in lending to Micro Enterprises.
Going forward, Chairperson VR Iyer’s strategies hinges on increasing the profitability of BoI. Towards this end, the credit/deposit ratio is going to be improved to an ambitious 78%. For those who think that such an aim is easily said than done, the top management of BoI led by VR Iyer has chalked out a six-prong strategy that includes emphasis on CASA growth, expansion of SME, Retail and Rural Businesses, focus on Credit Monitoring and Recovery, inclusive growth through Financial Inclusion, progress on IT Enabled Services for better customer satisfaction, and focused attention on Human Resources.
Such an integrated approach is why the market believes that Bank of India stock too might outperform in the long-term.